Sometimes a debtor will file a New York bankruptcy case and then come to regret it. Or, a debtor will make an incurable mistake and wants to withdraw his or her case. The fear is that a do-over will provide them with fewer options or that if they choose not to refile, then they’ll have a bankruptcy notation on their credit reports and nothing to show for it. What options do debtors in these situations have?
The short answer is none. Once a debtor commits to filing bankruptcy there is no way to completely unwind it to bring things back to where they were pre-filing. When someone files bankruptcy, the court stamps a case number to the debtor’s file and then publishes it to a federal database such as PACER. Creditors and credit-reporting agencies are alerted to the filing, and the latter will place the bankruptcy notation to the debtor’s file. Withdrawing a case, if it were possible, or dismissing it cannot undo this.
That does not, however, mean that all is lost for debtors.
Debtors do have the option to dismiss their cases, but the extent to which they have this power depends on what chapter they filed in. Chapter 13 debtors can essentially dismiss their cases at will, but chapter 7 is different because a voluntary dismissal requires approval of the bankruptcy court. The reason is that chapter 7 liquidates non-exempt assets, so the bankruptcy trustee has an interest in ferreting out those assets and selling them for the benefit of the creditors. If a trustee suspects there are unlisted non-exempt assets, then it’s more likely that he or she will object to dismissal, and the debtor will be stuck. This is not a happy prospect.
What all this means is that debtors who file a chapter 7 bankruptcy initiate a process they will not be able to fully control. Other interested parties to the bankruptcy case can oppose a voluntary dismissal. This is the gist of rule 1017 and section 707(b) of the Bankruptcy Code. In any event, a debtor’s voluntary dismissal can only be for cause and after notice and a hearing. Debtors also have the alternative of converting their cases to chapter 13, if they meet its eligibility requirements.
None of this should intimidate debtors from considering bankruptcy. Indeed, usually the question isn’t, “How can I get out of bankruptcy,” so much as, “How can I stay in chapter 7?” Most debtors are more worried about affording chapter 7 or beating its means test if their incomes are sufficiently high.
It is, though, a reason to not file bankruptcy without talking to a lawyer. If you are facing financial difficulties then talking to an experienced New York bankruptcy attorney will help you more than trying to navigate chapter 7 and the bankruptcy system on your own.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.
